Little old New Zealand made international news in the past week or so, with word of the intervention in foreign exchange markets by the Reserve Bank of New Zealand being reported in the likes of the Washington Post. The Post ran an article headed “In global currency war, a new front opens in the South Pacific” that began:
“From (way) down under comes a new front in the push and pull over world currency values: Stung by the rise in the New Zealand dollar, affectionately known as the kiwi, the country’s central bank last week acknowledged that it had intervened in foreign exchange markets to try to fight any further appreciation.
It was a cautionary move, New Zealand Reserve Bank Governor Graeme Wheeler said, to “take . . . the tops off rallies” and curb what New Zealanders worry is a runaway property market driven by global money rushing into the country, according to reports in the New Zealand Herald.
If the currency fight has been joined in Wellington, can it be anything less than a global war?”
Then this week Max Keiser picked up the ball and ran with it, focussing on this Washington Post story in his lead up to an interview with Currency War author Jim Rickards.
Here’s the short 1.42 minute excerpt from the Keiser show:
As Stacey Herbert points out this is a “misallocation of time energy and capital” where governments and central banks focus on trying to micro manage exchange rates and economies, instead of dealing with the real causes of these problems.
Jim Rickards on Currency War Winners and Losers
Below is the full Keiser show episode which is worth watching as the discussion of the RBNZ intervention is a lead in for the 2nd half of the show featuring an interview with Jim Rickards (begins at 12.13min).
Not surprisingly given Rickards’ book, this interview focuses largely on the topic of currency wars. Rickards starts out by explaining how:
Bernanke is saying this is not a currency war, as the aim is not to have sequential devaluations like in the 30’s, where devaluation occurred country by country over many years.
But rather “why don’t we all hold hands and jump out of the airplane all at once.”
The theory is that if Japan, UK, USA and ECB all eased at the same time, you’ll get stimulus but not a currency war. So in Bernanke’s view there would be no currency war as they are all printing at the same time.
However Rickards points out that the problem is the ECB is not on board. And there are still losers.
Currently these are the likes of are South Korea, Australia, Thailand, Taiwan, Switzerland and Brazil (he doesn’t mention it but we’d imagine New Zealand would also be in this mix too)
So it’s the G4 versus G16 and it’s still a currency war. He then discusses what we should expect because of this. Then to wrap up they cover:
- Why US dollar dominance won’t end any time soon – But how the BRICs are preparing for it already
- How it won’t be a BRIC nation but the IMF or SDR’s that end it.
- How the Indian government won’t succeed in stopping its citizens buying gold.
- How gold is leaving the weak hands or speculators and hedge funds and going to strong hands of individual investors and central banks.
- How close are we to China’s next announcement of its increase in gold holdings.
- How high they will need to be to compete with USA’s and ECB’s holdings.
- How it might be the chinese who are manipulating the price of gold down.